According to the National Institute of Statistics (INE), this rise represents an increase of 1.3% compared to 2021, which corresponds to more than 2,218 accommodations transacted.
Data released by INE confirm that the value of housing transactions last year soared by 13.1% year-on-year, to a total of €31.8 billion (+13.1% year-on-year). The growth registered in terms of prices was higher in the case of new housing (18.2%) than in existing ones (11.6%), although the latter accounts for three-quarters of the total amount of transactions.
Although the number of transactions has increased, official data shows a decrease of 2.7% in bank assessments carried out by experts at the service of banking institutions in the context of granting housing loans. Close to 120,000 were carried out last year, which represents a reduction of three percentage points in the relative weight compared to the purchase and sale of family accommodation, settling at 71.4%.
With regard to the licensing of buildings in Portugal, which totalled 24,696 last year, INE points out a decrease of 4.4% compared to the previous year, in which they had grown by almost 10%. 37,458 dwellings were licensed, -0.5% year-on-year. The number of buildings and dwellings deemed completed also dropped by 3.5% and 0.1%, respectively.
What is also falling is the number of buildings licensed for rehabilitation works, which stood at 4,491 processes last year. This indicator sank 9.3% compared to the previous year and 17.4% compared to 2019, the year before the Covid-19 pandemic, thus lowering the rehabilitation threshold of 20% in total works licensed in Portugal.
This is old news, as data on 2022 housing transactions was released in March.
Beware of the average transaction price, as this doesn't fully reflect price trends, but is also influenced by mix i.e. if the proportion of high-priced luxury homes being sold increases, then the average transaction value will increase faster than the average price of a house. This is due to a positive 'mix' effect.
Let me explain: imagine a small village with just 20 houses, only 2 transactions per year, and where the price of a house never changes, so there is no house price inflation. One luxury house is valued at €1 million, while the other 19 houses are identical and each worth only €200,000. Every year two of the cheaper houses sell, so the average house price = average transaction value of €200,000. Imagine a year where the luxury house is sold, and only one of the cheaper houses, so still two transactions. Then the average transaction value is now suddenly €600,000, three times what any previous year was. However, this is not 200% house price inflation, but a positive mix effect that explains the entire jump from €200,000 to €600,000, arising from the sale of the luxury house.
In a strong market, the mix effect is likely to be positive, exaggerating house price inflation. Likewise in a depressed market with lots of repossessions and forced sellers, the rich can afford to hold off, and so the mix effect is likely ot be negative (far more low priced housing for sale), exaggerating the rate of house price deflation.
Something to bear in mind!
By Billy Bissett from Porto on 19 Jul 2023, 12:40